Financing Your Home Purchase in Wilmington, NC

Best Ways To Finance

Fortunately, in today’s world, buyers still have many mortgage options. Contrary to media report, there is still plenty of liquidity in mortgage money. Yes, mortgages require more documentation than in 2007, but for those that can verify a job and income, money is still available. Always check with your mortgage lender to look at all options available and the different closing cost structures.

Adjustable-Rate Mortgage.

The interest rate is adjusted up or down periodically based on a financial market index (such as Treasury bills or Libor). Monthly payments start lower than for fixed-rate mortgages. The initial rate is set for a specified period — 1, 3, 5, 7, or 10 years — and then rates adjust on a schedule, say, annually. The adjustments generally are limited by annual caps and a life-of-the-loan cap.

Down Payment: $10,000

Mortgage Amount: $90,000

Term of Loan: 30 years

Interest Rate: 5.75 (until first rate adjustment)

Monthly Payment: $525 (until first rate adjustment)

Fixed-Rate 30-Year Conventional Mortgage.

A fixed-rate conventional loan is made by a mortgage company or bank for 30 years. Monthly payments (excluding taxes) remain unchanged for the life of the loan. Most lenders allow mortgages with as little as 3% down, but most require private mortgage insurance for loans with less than 20% down.

Down Payment: $10,000

Mortgage Amount: $90,000

Term of Loan: 30 years

Interest Rate: 6.5

Monthly Payment: $568

Fixed-Rate 15-Year Conventional Mortgage.

This is similar to the 30-year conventional mortgage, except the loan is repaid in half the time. Interest rates are typically lower than for a 30-year loan, and interest paid over the life of the loan is less, but the monthly payments are usually slightly higher. Government-backed loans — VA and FHA — are also available in 15-year terms.

Down Payment: $10,000

Mortgage Amount: $90,000

Term of Loan: 15 years

Interest Rate: 6

Monthly Payment: $759

USDA Loan.

Available in rural areas (Brunswick and Pender Counties in our area). This loan is subject to qualifying income being below the median income for our area and based on size of household. This loan allows for 100% financing with no private mortgage insurance.

Federal Housing Authority (FHA) Loan.

These are government-insured loans so homeowners can make a smaller down payment than on conventional loans. The limits on FHA loans are high enough to handle moderately priced homes in many parts of the country. FHA loans are assumable for future buyers who qualify. In our market area, you can obtain an FHA loan up to $303,750, after the 3% (or more) down payment. FHA loans are very credit lenient and very popular in the housing market right now due to their rates and reduced mortgage insurance vs conventional loans.

Down Payment: $3000

Mortgage Amount: $97000

Term of Loan: 30 years

Interest Rate: 6.5

Monthly Payment: $613

VA Loan.

These are loans for qualified veterans backed by the Department of Veterans Affairs with low or no down payment required. These mortgages are subject to the VA mortgage funding fee, depending on the size of the down payment. VA loans are assumable to qualified buyers and also very lenient in regards to credit like the FHA loans.

Down Payment: None

Mortgage Amount: $100,000

Term of Loan: 30 years

Interest Rate: 6.5

Monthly Payment: $632

Seller Financing.

Sellers may take back a loan against their equity in the property in the form of a first or second mortgage. One approach to owner financing is to use a balloon mortgage calculated and repaid for 5 or 7 years as a 30-year mortgage, but then the balance of the loan is due in a lump sum.

Down Payment: $15,000

Mortgage Amount: $85,000

Term of Loan: 5 years

Interest Rate: Negotiable

Monthly Payment: Depends on rate

Assumable Mortgage.

A buyer takes over the existing mortgage — usually FHA or VA at its current interest rate, with the concurrence of the lender. An assumption may have a lower rate than those currently available, and taking over the mortgage may save on closing costs. The down payment makes up the difference between the sales price and the balance on the loan.

Down Payment: $30,000

Mortgage Amount: $70,000

Term of Loan: Time remaining on loan

Interest Rate: Same as seller had

Monthly Payment: Same as seller was paying

Combo Loans

Normally when a buyer puts less than 20% down, they must have private mortgage insurance. Often times the buyer can avoid this by doing an 80% first mortgage loan and follow it up with a 2nd mortgage for the difference up to 95% of the purchase price.

Buy-Down Mortgage Plan.

The seller or a third party provides additional cash to the lender in exchange for a lower interest rate for the buyer. Approaches vary among permanent buy-downs, multi-year and graduated plans.

Down Payment: $10,000

Mortgage Amount: $90,000

Term of Loan: 30 years

Interest Rate: 4.50% (initial)

Monthly Payment: $456 (until subsidy diminishes or expires)

Chris Hutchens, Alpha Mortgage contributed to this post.